Wikileaks Reports JP Morgan Document on 10B5-1 Trading Plans: Claims Inider Trading

Wikileaks is reporting sudden discovery of the 10B5-1 trading plan:

A confidential memo obtained by Wikileaks shows that not only has the U.S. Securities and Exchange Commission created an insider trading loophole big enough to drive a truck through, but that Wall Street is taking full advantage of it, establishing 'how-to' programs and even client service divisions to help well-heeled clients circumvent insider trading regulations.

However, life just isn't that simple. There are several ways of structuring these plans, and there has been some evidence that these plans may be getting better results than you might mathematically think.

But the story isn't new, and the SEC is hardly ignoring potential abuse. Also, if someone uses the particular approach mentioned in this leaked document, they will probably lose the legal protection that 10B5-1 plans offer. Also, an executive wishing to game the system has much more effective and invisible methods of doing so. I covered the topic last December in Corporate Secretary.

Financial Times on Insider Trading

The Financial Times has another scoop - a study it commissioned, looking at stock trading in select compaines running up to announcements of big M&A activity:

Almost 60 percent of the 27 big deals announced in North America this year were precded by unexplained spikes in trading in the stock of the target company, according to a review of data by Measuredmarkets, a Toronto research firm. This compares with 15 percent for the seven largest deals announced in 2003.

Let's not go totally off the board, as 27 deals do not make a large subject for statistical analysis. And these were only "suspicious trades" and not an item-by-item analysis to see who was involved. But the analysis did look at whether news on specific days might have acted as an expected trigger for the activity. The pattern depended on the industry, with the spikes happening 80 percent of the time with hotels and casinos and just under a third of the time in telecommunications.

Although this isn't proof - let's be clear on that - it sure is a whole lot of smoke. Combine this with the study that the FT featured on July 30, showing that many Wall Street analysts received personal favors from executives whose companies they followed, and you've got to wonder if anything has changed in the world of big investing. Actually, you could assume that it's business as usual, which is a pity. Such activities are undertaken by robber barons - emphasis on the robber - and not real businesspeople, who have some regard for the entire activity of business itself.

The article itself is here, though you have to be a subscriber.